New laws which apply the Unfair Contract Terms legislation to insurance contracts will take effect on 5 April.
In response to Recommendation 4.7 of the Financial Services Royal Commission, the Government has extended the unfair contract terms regime to insurance contracts that are covered by the Insurance Contracts Act 1984 (Cth) (Insurance Contracts Act) which are also standard form consumer or small business contracts (as defined).
The regime will apply to insurance contracts that are new or renewed (or terms of a pre-existing contract varied) from 5 April 2021. This means insurers and their agents need to reconsider their wordings prior to then. For insurance brokers, their clients will have new rights to challenge terms as being unfair.
The National Insurance Brokers Association (NIBA) CEO, Dallas Booth said, “This is an important insurance law reform, and we strongly recommend all members familiarise themselves with the new laws.”
Until 5 April 2021, insurance contracts regulated under the Insurance Contracts Act (including both general and life insurance contracts) are excluded from the UCT laws.
NIBA’s legal adviser Mark Radford has prepared a detailed note on the operation and impact of the new laws which is available on the member portal of the updated NIBA website.
Booth adds, “As always, it is complicated and the devil is in the detail, but I do believe insurance brokers should aim to develop an understanding of these reforms.”
The UCT regime has the effect of voiding a term in a relevant contract that is declared to be unfair by a court. Radford has cautioned that insurers (and their agents) are subject to a great challenge in trying to amend wordings prior to 5 April 2021 and this will come at a significant cost and risk.
“For insurance brokers acting on behalf of a client, this regime is another tool in a consumer’s arsenal to get their claim paid. Insurance brokers will need to have an understanding of how it operates in order to properly assist their clients when appropriate,” he added.
You can access the entirety of Mark Radford’s note on this topic on the NIBA website member portal here (you will need to log-in to with your NIBA credentials).